It’s still summer in Poland. But winter is coming.
According to Reuters, outside the Lubelski Wegiel Bogdanka coal mine, people lined up in their cars and trucks to stock up on coal.
Why? Because 3.8 million households in the country rely on it for heating in winter.
“It’s beyond imagination, people are sleeping in their cars,” a 57-year-old man named Arthur told Reuters. I remember the communist times, but it never occurred to me that we could go back to something even worse.
Following Russia’s invasion of Ukraine, Poland and the European Union imposed an embargo on coal imports from Russia. Although Poland produces coal, the country relies heavily on imported coal for much of its household heating.
Lukasz Horbach, head of the Polish Coal Traders Chamber of Commerce, told Reuters the embargo had “turned the market upside down”.
“Up to 60% of those using coal for heating could be affected by energy poverty,” says Horback.
Despite the climate activists sustained effort to replace coal in power generation, black shale is still in demand.
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Poland is not the only country that uses coal.
According to the International Energy Agency, coal consumption will increase globally.
“Based on current economic and market trends, global coal consumption is forecast to grow by 0.7% in 2022 to 8 billion tonnes, assuming China’s economy recovers as expected in the second half of the year,” says a recent IEA report.
“This global total will match the annual record set in 2013, and coal demand is likely to increase further next year to a new all-time record.”
The IEA notes that as the global economy has recovered from the COVID-19 pandemic, global coal consumption has already recovered by approximately 6% in 2021.
Analysts point out that the dynamics of coal supply and demand could lead to its glorious resurgence.
“Looking at the year ahead in the northern winter with gas prices in Europe and gas supply availability, countries are moving back to coal,” Shaw and Partners senior analyst Peter O’Connor told CNBC.
“And supply [of coal] is tight. Why? As no one is building capacity and markets will remain constrained given the weather and COVID. So this market will stay higher for longer, possibly into calendar year 2023.”
Time to review coal stocks again?
Of course, coal no longer makes headlines in the investor world. In fact, the only coal-focused ETF—the VanEck Vectors Coal ETF (KOL)—ceased trading in December 2020.
But the industry is far from dead.
Alliance Resource Partners (ARLP), a diversified producer and marketer of steam coal to major U.S. utilities and industrial users, recently raised its cash distribution to investors by 14%.
Shares are also up 91% year-to-date, in stark contrast to double-digit decline in the broad market.
Another example is Peabody Energy (BTU), a St. Louis-based coal producer. The company’s products are essential for power and steel production. Its stock is up 107% in 2022.
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This article provides information only and should not be construed as advice. Provided without any warranty.